Integrated reporting and financial performance of South African listed banks
- Author(s)
-
DOIhttp://dx.doi.org/10.21511/bbs.14(2).2019.11
-
Article InfoVolume 14 2019, Issue #2, pp. 128-139
- Cited by
- 2769 Views
-
540 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The recent development of integrated reporting intends to address the limitations associated with corporate reporting practices. This paper aims to examine whether a statistically significant relationship exists between integrated reporting quality and financial performance. Secondary data was used, namely the integrated reports and annual financial statements of South African banks listed on the Johannesburg Stock Exchange (JSE) for 2010–2014. For the period 2005–2009, only the financial statements were used, since integrated reporting was not yet mandatory. The research design was longitudinal and it combined qualitative and quantitative methods. Descriptive statistics and Feasible Generalized Least Square (FGLS) were used to explore the relationships between financial performance and integrated reporting quality. The results indicate that there is a positive relationship between integrated reporting quality (IRQ) and earnings per share (EPS). However, there is no significant relationship between IRQ and Tobin’s q (Q-Ratio), IRQ and return on equity (ROE), IRQ and return on assets (ROA) as well as IRQ and economic value added (EVA). Moreover, there are no significant differences on the financial performance of the listed banks before and after the introduction of integrated reporting.
- Keywords
-
JEL Classification (Paper profile tab)M41, G21, G34
-
References49
-
Tables4
-
Figures2
-
- Figure 1. Line plots for financial performance of the banks over the period 2004–2014
- Figure 2. Line plots for integrated reporting quality of the banks over the period 2010–2014
-
- Table 1. Descriptive statistics of the panel data for financial performance of the banks
- Table 2. Descriptive statistics of the integrated reporting quality of the banks
- Table 3. Parameter estimates of the FGLS models
- Table 4. Descriptive statistics of the banks’ performance before and after integrated reporting
-
- Alqallaf, H., & Alareeni, B. (2018). Evolving of Selected Integrated Reporting Capitals among Listed Bahraini Banks. Journal of Accounting and Applied Business Research, 1(1), 1-21.
- Baboukardos, D., & Rimmel, G. (2016). Value relevance of accounting information under an integrated reporting approach: A research note. Journal of Accounting and Public Policy, 35(4), 437-452.
- Barth, M. E., Cahan, S., Chen, L., & Venter, E. (2016). The economic consequences associated with integrated report quality: early evidence from a mandatory setting (Unpublished working paper). University of Pretoria.
- Barth, M. E., Cahan, S., Chen, L., & Venter, E. (2017). The economic consequences associated with integrated report quality: capital market and real effects. Accounting, Organizations and Society, 62, 43-64.
- Bernardi, C., & Stark, A. W. (2018). Environmental, social and governance disclosure, integrated reporting, and the accuracy of analyst forecasts. The British accounting review, 50(1), 16-31.
- Blumberg, B., Cooper, D. R., & Schindler, P. S. (2014). Business research methods (4th ed.). London: McGraw-Hill Education.
- Buitendag, N., Fortuin, G. S., & De Laan, A. (2017). Firm characteristics and excellence in integrated reporting. South African Journal of Economic and Management Sciences, 20(1), 1-8.
- Carels, C., Maroun, W., & Padia, N. (2013). Integrated reporting in the South African mining sector. Corporate Ownership and Control, 11(1), 991-1005.
- Cerasi, V., & Oliviero, T. (2015). CEO compensation, regulation, and risk in banks: Theory and evidence from the financial crisis. International Journal of Central Banking, 11(3), 241-297.
- Cohen, J. R., Holder-Webb, L. L., Nath, L., & Wood, D. (2012). Corporate reporting of nonfinancial leading indicators of economic performance and sustainability. Accounting Horizons, 26(1), 65-90.
- Cook, R. D. (1977). Detection of Influential Observation in Linear Regression. Technometrics, 19(1), 15.
- Cook, R. D., & Weisberg, S. (1982). Residuals and influence in regression. New York: Chapman and Hall.
- Dam, L., & Scholtens, B. (2015). Toward a theory of responsible investing: On the economic foundations of corporate social responsibility. Resource and Energy Economics, 41, 103-121.
- De Hoyos, R. E., & Sarafidis, V. (2006). Testing for Cross-Sectional Dependence in Panel-Data Models. The Stata Journal, 6(4), 482-496.
- De Villiers, C., & Sharma, U. (2017). A critical reflection on the future of financial, intellectual capital, sustainability and integrated reporting. Critical Perspectives on Accounting.
- De Villiers, C., Rinaldi, L., & Unerman, J. (2014). Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7), 1042-1067.
- De Villiers, C., Venter, E. R., & Hsiao, P. C. K. (2017). Integrated reporting: background, measurement issues, approaches and an agenda for future research. Accounting & Finance, 57(4), 937-959.
- Dhaliwal, D., Li, O. Z., Tsang, A., & Yang, Y. G. (2014). Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency. Journal of Accounting and Public Policy, 33(4), 328-355.
- Du Toit, E. (2017). The readability of integrated reports. Meditari Accountancy Research, 25(4), 629-653.
- Dube, V. (2018). The association between integrated reporting and company financial performance: a graphical time-series approach (Unpublished Masters dissertation). University of Pretoria.
- Dumay, J., Bernardi, C., Guthrie, J., & Demartini, P. (2016). Integrated reporting: a structured literature review. Accounting Forum, 40(3), 166-185.
- Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857.
- Eccles, R. G., Krzus, M. P., & Ribot, S. (2015). Meaning and momentum in the integrated reporting movement. Journal of Applied Corporate Finance, 27(2), 8-17.
- Elzahar, H., Hussainey, K., Mazzi, F., & Tsalavoutas, I. (2015). Economic consequences of key performance indicators’ disclosure quality. International Review of Financial Analysis, 39, 96-112.
- Erasmus, C., & Makina, D. (2014). An Empirical Study of Bank Efficiency in South Africa Using the Standard and Alternative Approaches to Data Envelopment Analysis (DEA). Journal of Economics and Behavioral Studies, 6(4), 310-317.
- Flannery, M. J., Kwan, S. H., & Nimalendran, M. (2013). The 2007–2009 financial crisis and bank opaqueness. Journal of Financial Intermediation, 22(1), 55-84.
- Gillan, S., & Martin, J. D. (2002). Financial engineering, corporate governance, and the collapse of Enron (Governance Working Paper No. 2002-001). University of Delaware, College of Business and Economics.
- Haji, A. A., & Anifowose, M. (2016). The trend of integrated reporting practice in South Africa: ceremonial or substantive? Sustainability Accounting, Management and Policy Journal, 7(2), 190-224.
- Haji, A. A., & Anifowose, M. (2017). Initial trends in corporate disclosures following the introduction of integrated reporting practice in South Africa. Journal of Intellectual Capital, 18(2), 373-399.
- Healy, P. M., & Palepu, K. G. (2003). The fall of Enron. Journal of Economic Perspectives, 17(2), 3-26.
- Iannou, I., & Serafeim, G. (2014). The consequences of mandatory corporate sustainability reporting: Evidence from four countries (Working Paper No. 11-100). Havard Business School.
- IIRC. (2013). International
Framework. - Joubert, W. S. (2014). An assessment of integrated reporting practices in the mining industry of South Africa (Unpublished Masters dissertation). University of Johannesburg.
- Krasodomska, J. (2015). CSR disclosures in the banking industry. Empirical evidence from Poland. Social Responsibility Journal, 11(3), 406-423.
- Lee, K.-W., & Yeo, G. H.-H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47(4), 1221-1250.
- Li, Y., Gong, M., Zhang, X.-Y., & Koh, L. (2018). The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. The British Accounting Review, 50(1), 60-75.
- Marx, B., & Mohammadali-Haji, A. (2014). Emerging trends in reporting: an analysis of integrated reporting practices by South African top 40 listed companies. Journal of Economic and Financial Sciences, 7(1), 231-250.
- Miller, S., & Startz, R. (2018). Feasible Generalized Least Squares Using Machine Learning. SSRN.
- Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: a resource dependence perspective. New York: Harper & Row.
- Pistoni, A., Songini, L., & Bavagnoli, F. (2018). Integrated reporting quality: an empirical analysis. Corporate Social Responsibility and Environmental Management, 25(4), 489-507.
- Rossouw, J., & Styan, J. (2019). Steinhoff collapse: a failure of corporate governance. International Review of Applied Economics, 33(1), 163-170.
- Serafeim, G. (2015). Integrated reporting and investor clientele. Journal of Applied Corporate Finance, 27(2), 34-51.
- Smit, A. M., & Zyl, J. (2016). Investigating the extent of sustainability reporting in the banking industry. Banks and Bank Systems, 11(4), 71-81.
- Stent, W., & Dowler, T. (2015). Early assessments of the gap between integrated reporting and current corporate reporting. Meditari Accountancy Research, 23(1), 92-117.
- Stewart, G. B. (2002). Enron signals the end of the earnings management game. EVAluation, 4(5), 1-6.
- Steyn, M. (2014). Organisational benefits and implementation challenges of mandatory integrated reporting: Perspectives of senior executives at South African listed companies. Sustainability Accounting, Management and Policy Journal, 5(4), 476-503.
- Tonge, A., Greer, L., & Lawton, A. (2003). The Enron story: you can fool some of the people some of the time… Business Ethics: A European Review, 12(1), 4-22.
- Watson, L. (2015). Corporate social responsibility research in accounting. Journal of Accounting Literature, 34, 1-16.
- Zhou, S., Simnett, R., & Green, W. (2017). Does integrated reporting matter to the capital market? Abacus, 53(1), 94-132.
-
The effect of working capital management on profitability: a case of listed manufacturing firms in South Africa
Investment Management and Financial Innovations Volume 14, 2017 Issue #2 (cont. 2) pp. 336-346 Views: 3200 Downloads: 2651 TO CITE АНОТАЦІЯWorking capital management plays a pivotal role in enhancing the operational efficiency of firms and their ultimate profitability. Therefore, the purpose of this study was to examine the trends in working capital management and its impact on the financial performance of listed manufacturing firms on the Johannesburg Securities Exchange (JSE). A panel data methodology was used with different regression estimators to analyze this relationship based on an unbalanced panel of 69 manufacturing firms listed during the period 2007–2016.
The findings revealed that the average collection period and the average payment period are negative and statistically significant for profitability, implying that firms which efficiently manage their accounts receivable and those that pay their creditors on time perform better than those that do not. Additionally, a positive statistically significant relationship between the number of days in inventory and profitability was supported suggesting that firms which stock-up and maintain their inventory levels suffer less from stock-outs and avoid challenges of securing financing when needed. This increases their operational efficiency and ensures profitability in the long run. It could not be ascertained whether a shorter or longer cash conversion cycle enhances firm profitability, since findings to support this premise were weak. However, it was observed that manufacturing firms are on average, carrying lot of debt in their capital structures.
The present study contributes to existing literature by presenting one of the very recent findings on this topic while simultaneously testing the validity of recent local and international methodologies, in order to inform policy change. -
Industrial development in Saudi Arabia: disparity in growth and development
Anis Ali
doi: http://dx.doi.org/10.21511/ppm.18(2).2020.03
Problems and Perspectives in Management Volume 18, 2020 Issue #2 pp. 23-35 Views: 3004 Downloads: 1021 TO CITE АНОТАЦІЯIndustrial development in any nation plays a vital role in the strengthening of the economy and employs human resources as per specifications and directly towards the mainstream of the nation. In Saudi Arabia, there was rapid industrialization for four decades. Some manufacturing industries performed well, while some internal and external business environment factors influenced the others’ performance. The study focuses on historical development, as well as recent trends of well-performing and poor-performing industries of Saudi Arabia. Small manufacturing industries in Saudi Arabia are underdeveloped and need more attention to attain sustainable and progressive growth rate in the form of the number of establishments to enjoy the potential. Manufacture of tobacco, computer, electronics and optics, pharmaceuticals and transport equipment are the deprived and underdeveloped industries of the manufacturing sector. There should be some easy credit schemes for the development of deprived or underdeveloped manufacturing industries. To attain sustainable growth and development of the manufacturing sector, a positive attitude of the government towards underdeveloped manufacturing industries, favorable labor laws, and entrepreneurial awareness, technical and financial assistance are necessary. The growth and development of the manufacturing sector of Saudi Arabia will be helpful in the attainment of goals of Vision 2030.
-
Why banks should consider ESG risk factors in bank lending?
Sarwar Uddin Ahmed ,
Samiul Parvez Ahmed ,
Ikramul Hasan
doi: http://dx.doi.org/10.21511/bbs.13(3).2018.07
Banks and Bank Systems Volume 13, 2018 Issue #3 pp. 71-80 Views: 2817 Downloads: 1132 TO CITE АНОТАЦІЯWhy banks should be concerned about incorporating environmental, social and governance (ESG) criteria in the lending process? What is the motivation? This study aims to find the motives for considering environmental, social and governance (ESG) criteria in bank lending process. A primary survey has been conducted to know the current status and motivation for incorporating ESG factors in investment decisions. Sample comprised 30 private commercial banks (PCBs) operating in Bangladesh. Data collected were analyzed with graphs, descriptive statistics, and regression analysis. Findings of the study indicate that banks are mostly considering basic environmental, social and governance factors set by regulators qualitatively. They are lagging behind in considering the advanced ESG criteria needed for sustainable and efficient credit risk management. Based on motivation for incorporating ESG factors, it was found that banks pioneering in incorporating ESG factors in lending decisions are compensated through better financial performance. Findings of the study are expected to encourage practitioners and policy-makers to take more pragmatic steps to incorporate ESG risk factors quantitatively in lending decision-making process.
